United States: Corporate And Financial Weekly Digest - August 23, 2013

Last Updated: August 28 2013

Edited by Robert Weiss and Gregory Xethalis


SEC, CFTC and FINRA Issue Joint Advisory on Business Continuity and Disaster Recovery Planning

On August 16, 2013, the Securities and Exchange Commission's Office of Compliance Inspections and Examinations, the Financial Industry Regulatory Authority and the Commodity Futures Trading Commission's Division of Swap Dealers and Intermediary Oversight jointly issued a staff advisory on business continuity and disaster recovery planning. The SEC, FINRA and CFTC compiled best practices and lessons learned from firms that were impacted by the events surrounding Hurricane Sandy. The staff advisory encourages firms to review their business continuity plans (BCPs) and suggests effective practices in the following areas:

  • Preparation for widespread disruption, including remote access capabilities;
  • Planning for alternative locations;
  • Evaluating the risk of critical vendor relationships and examining whether such vendors have adequate BCPs;
  • Telecommunications services and technology;
  • Communication plans with customers, other external parties and staff;
  • Regulatory and compliance considerations, such as updating BCPs to include new regulatory and self-regulatory organization requirements; and
  • BCP reviewing and testing.

The staff advisory is available here.

FINRA Updates Private Placement Form and Issues FAQ

The Financial Industry Regulatory Authority updated the Private Placement Form that firms must use to file offering documents and information pursuant to FINRA Rules 5123 (Private Placements of Securities) and 5122 (Private Placements of Securities Issued by Members). The updated form includes new questions, such as a disciplinary history question, that are intended to assist FINRA in prioritizing its review of private placement filings. The questions are not intended to set new standards of disclosure, due diligence or information gathering requirements. FINRA has also provided additional guidance regarding the updated form in a Private Placement Form FAQ.

The regulatory notice is available here.

SEC Approves Amendments to FINRA Rule Regarding Release of Disciplinary Complaints, Decisions and Other Information

The Corporate and Financial Weekly Digest edition of March 29, 2013 summarized the Financial Industry Regulatory Authority's proposed rule change to amend Rule 8313, which governs the release of disciplinary and other information by FINRA to the public. Among other things, the amendments establish general standards for the release of disciplinary information to the public to provide greater information regarding FINRA's disciplinary actions, clarify the scope of information subject to Rule 8313 and eliminate provisions that do not address the release of information to the public. The Securities and Exchange Commission has approved the rule amendments, which will become effective on December 16, 2013, and will apply prospectively.

The regulatory notice is available here.


SEC's Alleged Failure to Notify SIPC of Ponzi Scheme Does Not Create Liability

A Florida federal court has dismissed a class action alleging that the Securities and Exchange Commission was negligent for failing to report that Robert Allen Stanford's $7 billion fund was a Ponzi scheme, finding the Misrepresentation Exception to the Federal Tort Claims Act (FTCA) shielded the SEC. The Misrepresentation Exception bars claims against the United States arising from alleged misrepresentation or deceit and protects the United States from tort liability for pecuniary injuries attributable to reliance on the government's negligent misstatements.

Plaintiffs asserted that the SEC, after several investigations in 1997 and 2004, concluded the Stanford Group was a Ponzi scheme but failed to report those findings to the Securities Investor Protection Corporation (SIPC). Plaintiffs sought to hold the SEC liable for its losses on the basis that the SEC is responsible for reporting the findings of its investigations to regulatory and consumer protection agencies and that their losses would have been avoidable if the SEC had reported its findings to SIPC.

The US District Court for the Southern District of Florida found that plaintiffs failed to "maneuver" their claims outside of the Misrepresentation Exception because they based their cause of action on the assertion that the SEC failed to communicate information about the Stanford Group. The court reasoned that plaintiffs "cannot disguise the essence of their negligent misrepresentation claim by repackaging the SEC's alleged negligence from having failed to 'notify' or 'report'...to having failed to send the required notification...." Accordingly, it concluded that the plaintiffs' cause of action is a "classic claim for misrepresentation" and thus falls within the Misrepresentation Exception.

Zelaya et al. v. U.S., case number 0:11-cv-62644 (S.D. Fla. August 12, 2013).


Agencies Seek to Bolster Leverage Ratio Standards for Largest Banks

On August 20, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) announced that they are seeking comment on a notice of proposed rulemaking (NPR) to strengthen the leverage ratio standards for the largest, most systemically significant US banking organizations. The NPR was published in the Federal Register on August 20, 2013, with a 60-day comment period.

Under the revised capital regulations, which the OCC approved on July 9, 2013 (new capital rule), the agencies established a minimum supplementary leverage ratio of three percent (supplementary leverage ratio). The supplementary leverage ratio, which is different from the general leverage ratio, is the ratio of an institution's tier 1 capital to its total leverage exposure, which includes all on-balance-sheet assets and many off-balance-sheet exposures. Under the new capital rule, banks subject to the supplementary leverage ratio requirement are required to calculate and report their supplementary leverage ratios beginning in the first quarter of 2015. The new minimum requirement, however, does not apply until 2018.

In this NPR, the Agencies propose to further increase the leverage capital requirements for the largest, most systemically significant US banking organizations. The NPR applies to any bank holding company (BHC) with more than $700 billion in consolidated total assets or $10 trillion in assets under custody (covered BHC) and any insured depository institution subsidiary of these BHCs (covered IDI). Using these asset thresholds, the NPR currently would apply to the eight largest, most systemically significant US banking organizations. The Agencies propose to establish a "well-capitalized" threshold of six percent for the supplementary leverage ratio under the Agencies' respective prompt corrective action regulations for any covered IDI. In addition, the Agencies propose to establish a leverage buffer for covered BHCs, which would require them to maintain at least two percentage points above the minimum supplementary leverage ratio requirement of three percent, for a total of five percent. Failure to maintain this buffer would result in limitations on dividend distributions and discretionary bonus payments.

The proposal, if adopted, will take effect on January 1, 2018, concurrent with the three percent minimum supplementary leverage ratio requirement in the new capital rule.

Comments on the NPR are due by October 21, 2013.

Read more.

Federal Reserve Issues Paper on Capital Planning and Rule for Assessments for Large Banks

On August 19, one day before issuing its notice of proposed rulemaking on bolstering leverage ratio standards (as discussed above in "Agencies Seek to Bolster Leverage Ratio Standards for Largest Banks"), the Board of Governors of the Federal Reserve System (Board) issued a paper on capital planning for large banks. The paper, Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice, "is intended to promote better capital planning at bank holding companies generally, and to provide greater clarity on the standards against which those practices are evaluated as part of the CCAR [Comprehensive Capital Analysis and Review] exercise. In particular, the Board emphasized that bank holding companies, when considering their capital needs, should focus on the specific risks they could face under potentially stressful conditions."

In its evaluation, the Board found that firms needed to improve a number of aspects of their capital planning processes, "including their accounting for risks most relevant to the specific business activities, their methods of projecting the effect of certain stresses on their capital needs, and their governance of the capital planning processes." The Federal Reserve will start the 2014 CCAR process in the fall. In addition to the 18 firms that participated in 2013, 12 firms with more than $50 billion in total assets that have not previously been part of the CCAR are expected to participate.

On August 16, the Board issued a final rule establishing annual assessment fees for its supervision and regulation of large financial companies. The final rule outlines how the Board determines which companies are charged, estimates the applicable expenses, determines each company's assessment fee and bills for and collects the assessment fees for large banks.

Read more.

OCC Revises Guidance on Commercial Real Estate Lending

On August 20, the Office of the Comptroller of the Currency (OCC) issued the " Commercial Real Estate Lending" booklet of the Comptroller's Handbook to replace the OCC's "Commercial Real Estate and Construction Lending" booklet issued in 1995. The booklet also replaces sections 210, "Income Property Lending," and 213, "Construction Lending," of the former Office of Thrift Supervision's (OTS) Examination Handbook issued in 2009 and 1994, respectively. The booklet reflects guidance issued since the release of the 1995 booklet. Updated guidance includes:

prudent loan workouts, management of concentrations, stress testing, updated interagency appraisal guidelines, and statutory and regulatory developments in environmental risk management. Discussions of statutes and regulations governing federal savings associations have also been incorporated. Guidance for acquisition, development, and construction (ADC) lending are expanded and issues unique to ADC and income-producing real estate lending are discussed in separate sections. Other topics that are new or expanded include supervisory loan-to-value, project feasibility, investor-owned residential real estate, amortization, debt yield, owner-occupied real estate, environmental risk management, and underwriting considerations for various property types.

The OCC also announced that the following documents are rescinded:

  • OCC Bulletin 2012-27, "Investor-Owned One- to Four-Family Residential Properties: Supervisory Guidance on Risk Management and Reporting Requirements" (September 17, 2012); and
  • OCC Advisory Letter 2003-7, "Guidelines for Real Estate Lending Policies" (August 8, 2003).

Read more.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions